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M.T.A.’s Biggest Headache: Its 5-Year Capital Plan

Even as the Metropolitan Transportation Authority seeks to overcome a $1.2 billon shortfall with fare increases and service cuts, an even weightier problem looms: The authority is uncertain how it will pay for a five-year capital spending plan that could cost as much as $30 billion.

The fare increases and cutbacks are meant to keep the system running next year. The capital plan is meant to keep it running for years beyond that through the purchase of new equipment, maintenance of tracks and renovation of stations.

“The need for investment in the system is gargantuan,” said Assemblyman Richard L. Brodsky, a Democrat from Westchester County who is chairman of a committee that oversees the authority. “Twenty-five years from now what we do on the capital plan will resonate much more loudly than what the debate is going to be about fare increases.”

The authority has two budgets.

One is the operating budget, which pays for things like fuel for buses, electrical power for subway trains and the salaries of the people who operate them. (On Thursday the authority will propose a 23 percent increase in fare and toll revenues and deep cuts in subway, bus and commuter rail service to balance its operating budget for next year.)

The other is the capital budget, which typically is renewed every five years and pays for major items like new trains and buses and for projects, like replacing subway tracks, that keep the system in good repair. It also pays for expansion projects like the Second Avenue subway.

The current capital plan expires at the end of next year, and the authority must submit a new five-year plan to the state for approval even as it seeks additional money to plug its operating deficit. Officials have estimated that the capital plan could cost $25 billion to $30 billion, much of which would be financed through bonds that the authority would repay over many years.

Both budgets are important, but Mr. Brodsky and others worry that the long-term needs will be lost in the tumult of settling the more immediate need.

“It would be a terrible mistake to take whatever resources may be available and use them all on the operating side,” Mr. Brodsky said.

The authority first began a capital spending program in 1982 in what became a successful effort to pull the transit system out of a catastrophic spiral of decay.

At first the programs were financed with a combination of money from the state and city and borrowing. After George E. Pataki became governor in 1995, he sharply cut state funds for the capital programs and told the authority to borrow more. As a result, the last two five-year plans have been, in the words of the authority’s current executive director, Elliot G. Sander, put on a credit card.

Photo

Financing is still undecided for the new $30 billion capital budget, which pays for major purchases like new trains, above.Credit
Mark Lennihan/Associated Press

That has made the authority one of the largest debtors in the country — it owes nearly $27 billion — and has hobbled it with fast-growing interest payments. Those payments come out of the operating budget and are in part responsible for the shortfall the authority faces next year, when it expects to spend nearly $1.5 billion on debt service.

“Not enough people recognize that the system is vulnerable, and if you don’t keep spending this money it will go back to the way it was in the ’70s before you can blink an eye,” said H. Dale Hemmerdinger, the authority’s chairman. “All the focus and all the talk so far has been on the operating budget, and the capital budget runs out next year and we need to know the money is going to continue to flow.”

The authority is looking for guidance from a state commission headed by Richard Ravitch, a former authority chairman, which was created last spring to recommend solutions to its chronic financial problems.

Mr. Ravitch, who spearheaded the first capital plan, had originally thought he would focus mostly on the authority’s capital needs, but the nation’s economic woes have put the authority in an immediate crisis that he now must grapple with as well.

The commission is expected to make its plan public in early December, just days before the authority’s board votes on its 2009 budget. It is expected to recommend a series of taxes and possibly tolls on the city-owned East River bridges to help finance the authority.

Mr. Ravitch said he could not discuss his commission’s work, but added, “They don’t have one hard dollar for their next capital plan, and let’s not lose sight of that.”

His commission’s recommendations will only begin a lengthy political process. The state also faces a budget crisis, and the authority’s problems will become part of a larger budget debate in Albany.

Jeff Kay, an authority board member who is also the director of the Mayor’s Office of Operations, said it was important that legislators understand that the operating and capital needs must be dealt with at the same time.

“It’s incumbent upon us to remind people this is not just a one-year problem,” Mr. Kay said. “You get one shot with the Legislature. You can’t come back next year and say, ‘You know what, we forgot the capital budget.’ ”

Gene Russianoff, staff lawyer for the Straphangers Campaign, a group that advocates on behalf of transit riders, said capital spending had saved the transit system from disaster. But, he said, a rescue of the capital plan now should not relegate riders to unfairly heavy fare increases.

“You could have the fanciest system with computerized signals and a fare that people can’t afford, and that’s wrong,” Mr. Russianoff said. “You’ve got to be able to provide a decent level of service at a reasonable price in a well-maintained system, and they’re all interconnected.”

The new capital plan is expected to dedicate $4 billion a year to bus and train purchases and to basic maintenance and construction work. An additional $1 to $2 billion or more would go toward the expansion projects, such as the Second Avenue subway. Officials said that they expected the federal government to provide some of the funds for those projects, but that financing for the rest has not been decided.

A version of this article appears in print on , on page A36 of the New York edition with the headline: M.T.A.’s Biggest Headache: Its 5-Year Capital Plan. Order Reprints|Today's Paper|Subscribe